The Nvidia scandal adds tension to the race between the United States and China for AI dominance

WASHINGTON. — For many billionaires, 2023 was a great year. Among them was Jensen Huang, the co-founder of Nvidia, who was one of the ten people on Earth who made the most money during those twelve months, driven by the tech sector boom and the explosive development of Artificial Intelligence (AI). What the Taiwanese-American magnate surely never imagined is that, at the close of that brilliant year for him and his company, during a quiet dinner at an Italian restaurant in Singapore, the seeds would be sown of what would ultimately become a spectacular fall wrapped in a scandal of alleged Chinese espionage, which has unleashed a global whirlwind of technological, financial, geopolitical and even national security impact. While the United States —and the rest of the world— is still trying to figure out the long-term scope of the crisis triggered by the resignation of Nvidia's CEO, experts are already warning of an impact on the tense relationship between Washington and Beijing amid the ongoing race to develop AI, a turning point in export controls on advanced American chips, and a new front of pressure on the Donald Trump administration, which is under scrutiny for its staunch defense of Huang despite the espionage suspicions. "The scandal adds an extra dose of instability to relations between the United States and China. And several questions immediately arise: Will Trump break his ties with Huang? Will he conclude that he acted on Xi Jinping's orders to undermine American competitiveness in AI, which could strain the relationship at the highest level?", posed Ali Wyne, research advisor for relations between the two powers at the International Crisis Group. That night in Singapore, almost three years ago, the then-celebrated CEO was seen in public for the first time alongside the Chinese executive Alice Huang. The woman had just restructured the tech company Megaspeed, based in that city-state, which over the following two years would acquire 4.8 billion dollars in restricted-access AI chips from Nvidia. But the company came under scrutiny amid accusations of violating United States export controls by diverting thousands of advanced devices to its main industry rival, China, while Huang maintained an extramarital relationship with the executive suspected of spying on him for the regime's intelligence services. Jensen Huang and Alice Huang, at a restaurant in Taipei, on May 22, 2025. - - CTI/AFPTV "The crisis has already drawn much more attention to the gaps in United States export controls, especially with regard to the smuggling of AI chips and their rental by Chinese companies in data centers abroad," Erich Grunewald, a researcher at the Institute for AI Policy and Strategy, a think tank in Washington, told LA NACION. "What really matters is whether this renewed interest in export controls translates into concrete action to close those gaps," he emphasized. "Taking action against these channels would widen the United States' advantage over China [in the AI race]." Among the many ramifications of the crisis, various experts emphasize the debate that has emerged in recent days in Washington over how it was possible that the Department of Commerce, led by Secretary Howard Lutnick, did not restrict the sale of Nvidia chips to Megaspeed, and the changes already beginning to take shape in controls over the industry. President Donald Trump and Commerce Secretary Howard Lutnick at the White House. Alex Brandon - AP Lutnick, very close to Trump, was directly singled out in the case by Treasury Secretary Scott Bessent, and has been summoned by Democratic and Republican lawmakers to give explanations on Capitol Hill, amid fears that the crisis could pose risks to national security. "The new Congress [under Democratic control after the midterm election victory] will likely exert considerable pressure on Trump to tighten United States export controls and closely examine his relationships with influential tech sector executives," Wyne ventured, also wondering whether the president will dare to dismiss Lutnick. The Department of Commerce is key to the affair as the agency in charge of managing exports of sensitive American technologies, such as those of Nvidia, which controls nearly 90% of the market for computer chips used in major AI projects. Nvidia controls nearly 90% of the market for computer chips used in major AI projects. I-HWA CHENG - AFP The former American diplomat Brett Bruen, president of the strategic communications firm Global Situation Room, in Virginia, predicted that the scandal "will be a turning point that will lead to the implementation of many more protocols and safeguards" in the industry. "Industry leaders acted far too carelessly in handling their information and their technology. On the other hand, it is evident that China is making a very aggressive effort to obtain and exploit them by any means at its disposal. This should send shivers down the spines of CEOs and boards of directors, who need to considerably reinforce their defenses," he told LA NACION. "Greater scrutiny is absolutely necessary," he added. Jensen Huang, the former CEO of Nvidia. PATRICK T. FALLON - AFP Experts anticipate that once the Democrats take control of Congress on January 3, they will push for a tightening of controls similar to those applied during Joe Biden's administration, which were aimed at limiting China's access to advanced semiconductors and AI technology, and which were partly reversed by the Trump administration. The United States Congress quickly took note of the scandal and, with the subpoenas for Jensen Huang and Lutnick to testify, seeks to clarify how much the Trump government knew about the situation before it publicly erupted and whether it did nothing about it despite the foreseeable risks. "The recent reports raise serious concerns about our national security and the protection of sensitive United States technologies," warned Republican Senator Tim Scott (South Carolina). Federal officials and intelligence services had warned the president at least twice about suspicions that a Chinese spy was in a relationship with Huang, and that the woman was operating to funnel thousands of Nvidia's latest-generation chips to China despite the trade ban on those devices. "This story is bringing to light a lot of 'dirty laundry' about the internal processes followed by the Bureau of Industry and Security, an agency of the Department of Commerce, and the government when enforcing export controls," Sam Bresnick, a researcher at the Center for Security and Emerging Technology at Georgetown University in Washington and a specialist in the tech competition between the United States and China, told LA NACION. The specialist stressed the need to focus attention on the smuggling of some 240,000 Nvidia chips which, according to various reports, Alice Huang helped introduce into China, with an estimated value of 7.5 billion dollars. "In a world where everyone is begging to get those chips [Graphics Processing Units, GPUs], Megaspeed somehow became the preferred supplier. And it exported them illegally to China. Did Jensen Huang know that was their final destination, in violation of United States law? The damage is already done. In terms of competitiveness, China could be years behind if this had not happened," Armando Viteri, CEO of Neubloc, an AI strategic consulting firm in Arizona, explained to LA NACION. In Washington, questions are being asked about the extent to which Huang, an ally of Trump, may have influenced the White House's policy on export controls. A key aspect is the case of the H200 chips: the administration removed them from the list, thus allowing their sale to China. "And apparently Huang played a fundamental role in that," Bresnick noted. "On the one hand, there is concern from an intelligence standpoint, given that executives are being targeted by this type of operation. And on the other, there is also a general concern about what the United States government did or failed to do, and what it knew about that smuggling to China. That constitutes a major national security problem," he said. President Donald Trump and Nvidia CEO Jensen Huang at the White House. KENT NISHIMURA - AFP In that sense, Bresnick said it is logical to think that Huang would have been a "very attractive target" for Chinese intelligence services, and that it is reasonable to assume that other high-level American tech magnates "are in a similar situation." The rapid race to develop AI has set off global alarms and generated dramatic warnings from industry leaders, such as Dario Amodei of Anthropic and Sam Altman of OpenAI, that advanced models could spiral out of control. For that reason, Bruen considered that one of the most serious aspects of the former Nvidia CEO's scandal for tech sector leaders is that, "after constantly assuring that 'the future is in good hands' and that 'you can trust us,' Jensen Huang substantially undermined that trust." "Many questions arise and new protocols need to be established. Anyone who spends time with executives of companies that handle sensitive technologies should undergo a vetting process. It is alarming that such critical technological knowledge was left so unprotected, and that the company's top executive acted in such an irresponsible manner," he stressed. The Argentine Sebastián Cao, founder and CEO of the San Francisco-based firm Alquimia AI, explained that while China has developed its own families of chips, they are "30 to 40% lower in quality" than Nvidia's cutting-edge devices, which makes the Megaspeed smuggling and the measures that softened American export controls all the more significant. "The first part of the process is designing those advanced chips so you can have your own industrial chains and thus not depend on anyone. That is the great leap that the United States does not want China to make," he said. "That is why there is damage that has already been done," he added. While pressure on the government mounts in Washington, the Nvidia affair will add a high-level political chapter this week, when Trump meets with Xi at the Asia-Pacific Economic Cooperation (APEC) summit to be held next Wednesday and Thursday in the Chinese city of Shenzhen. Presidents Xi Jinping and Donald Trump at a recent meeting in Washington. WIN MCNAMEE - GETTY IMAGES NORTH AMERICA Although two officials from the Republican administration told American media on Friday that Trump is not expected to raise accusations about the alleged Chinese intelligence operation against Huang, the crisis of global scale will loom over the meeting. "The situation with Nvidia should not really have any impact on the trip. In all our conversations with the Chinese side, we do not negotiate American export controls, and we do not expect this issue to come up at all in any of our conversations in Shenzhen," they said. The two leaders arrive at the meeting with an active trade truce —extended until January 10— which seeks to maintain market stability while negotiations continue for a broader pact. "I think Trump tried to be accommodating to Xi during his first two years in office. However, the economic pressure, not to mention the national security-related pressure, is building up considerably," Bruen said. "Therefore, he will have to show that he is capable of taking a firmer stance toward Beijing," he added. By Guillermo Idiart